The Federal Energy Regulatory Commission (FERC) on Feb. 20 issued a suite of orders that will require subsidized energy storage and renewable power resource providers to meet a price floor in New York state’s capacity market, making it harder for them to compete with fossil fuel plants.
The move, which environmental groups said effectively bolsters fossil fuel generators by forcing renewable resource providers to pay a premium in the capacity market, follows a similar FERC order here in December that applied to PJM Interconnection, the largest U.S. power grid operator.
In a press release, FERC said the orders protect competition by narrowing exemptions from the price floor rules.
The move could make it harder for New York to meet its aggressive greenhouse gas reduction targets, including a goal to source 70% of its electricity from renewable sources by 2030, increasing to 100% a decade later.
FERC’s four orders apply to the New York Independent System Operator’s (NYISO) price floor meant to eliminate artificially low bids from the state’s capacity market, which pays generation providers to keep their power plants available for service to maintain system reliability.
Renewable energy resources such as wind and solar and energy storage projects that are incentivized by the state will be required to meet a minimum price in the capacity auction, even though cost declines in technology now often make them cheaper than fossil fuel alternatives.
Operators of fossil fuel plants have argued that subsidies for renewables reduce what their plants receive in capacity and energy markets.
In three separate orders, the commission said energy storage resources and a type of demand response should be subject to the so-called buyer-side market power mitigation rules. It also said the NYISO’s proposal to exempt certain renewables “fails to comply with prior Commission directives” and ordered the NYISO to come up with a narrower proposal for renewables.
FERC’s two Republican commissioners voted in favor of the orders, with the Democrat, Richard Glick, dissenting.
The American Council on Renewable Energy, a clean energy trade group, said the orders “directly conflict with policies New York expressly designed to accelerate the transition to pollution-free, renewable power.”
The NYISO, in a statement, said it was reviewing the orders.
“Competitive electricity markets, which were originally designed to provide reliable service at the least cost, are now at an inflection point,” NYISO President Rich Dewey said. “The wholesale markets must now accommodate state policies; not conflict with them.”
Analysts said the most core projects will move forward, while shorter-cycle developments will see the most dramatic investment cuts.
Oil and gas producer Cairn Energy on March 27 reduced investment plans by about a fifth, following the fall of oil prices to less than $30 per barrel.
Aker BP, 30% owned by BP, said on March 23 it would cut its planned 2020 capital spending by 20% but kept its production guidance unchanged.